As a result, the only period of outperformance for drug stocks is when the market is going down.
“So the second half of 2011 was a very good time for drug stocks, not because the fundamentals of the pharmaceutical sector were getting better, but because they bottomed out, expectations were low, dividends yields were 4 to 5 percent, and medium-term earnings were highly predictable," he said.
That predictability is one of the few advantages of these stocks thanks to the patent expiration dates, he added, noting that will be a bad year for AstraZeneca because it has patents expiring, for instance. At the same time, he said some therapy areas have been seeing productivity increasing.
“In drug stocks, once you’ve got a successful product it will grow for many, many years,” he said, giving no recommendations one way or the other.
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Disclosure information was not available for Jack Scannell or his company.